‘Will come out with more measures to deal with the price situation’

Grappling with the stressed economy, Finance Minister P. Chidambaram, on Saturday, said “hard decisions” would be taken in the next few days and weeks to trim wasteful expenditure and curb import of “inessential” items.

“We are going through a period of stress...we have to take some hard decisions. Many of these measures are being taken, and many measures will be announced in the next few days and weeks. Some measures to curb import of inessential items will also be announced. All these measures taken together will have beneficial impact”, he said, winding up a debate on Appropriation Bill in the Rajya Sabha.

Describing inflation as the worst form of taxation which hit the poorest the most, he said, the government would be coming out with more measures to deal with the price situation.

On hiking oil prices in the backdrop of rising prices in the international market and rupee depreciation, Mr. Chidambaram said “no decision has been taken and no decision will be taken in haste” and the government will weigh pros and cons before announcing any step.

Responding to the suggestion for cutting taxes on petroleum products, he said the matter could be considered provided states too agreed to reduce the incidence of tax on oil goods.

Attributing the sudden fall in the value of rupee to the May 22 announcement of the U.S. Federal Reserve regarding withdrawal of monetary stimulus, he said the government would take more measures to increase flow of capital to contain volatility in forex market.

Mr. Chidambaram said, “When you are facing gloomy situation, wasteful expenditure has to be curbed....You call it austerity measures, you can call it cut in non-Plan expenditure...while we must continue to spend and continue to find money for productive investment.”

Stating that there was need to curb all inessential imports, he said, “When you have the money, you can import anything and it does not make any difference to the economy. But when you are facing a stressful situation, you have to curb inessential imports.”

Regretting that India had to import coal despite having essential fuel in adequate quantities, he said a way had to be found out to deal with the issues concerning mining of coal and export of iron one fines.

Import of coal and ban on export of iron ore fines, in addition to large import of gold, have been adding to the pressure on the current account deficit (CAD), which has touched an all-time high of 4.8 per cent of the gross domestic product (GDP) in 2012-13.

Referring to inflation, Mr. Chidambaram said it could partly be attributed to the rise in the minimum support price (MSP), which in itself was a good thing as it meant more income for the farming community.

The other reason for inflation was spike in crude prices in the international market, Chidambaram said, adding “We don’t fix prices of crude oil. Yesterday it crossed 115 dollar per barrel...(but) we have to bear the consequences”.

Similarly, he said, India had to depend on import of edible oil and pulses, which also drove inflation.

On declining value of rupee, Mr. Chidambaram said its rate was market determined and there was no question of going back to the pre-1991 days of fixed exchange rate.

Observing that value of rupee had improved during the last few days, Mr. Chidambaram said, “...I keep my fingers crossed. We are fighting many unknown factors in the currency markets...but measures are being taken, measures will taken to increase dollar inflow,” he said. Referring to inflation, he said, it had to be tackled by addressing the supply-side constraints and removing distribution bottlenecks.

Dollar demand can be reduced as follows: 1. Reduce fuel oil import by reducing cars on road by taxing cars equal to cost of road and parking land as in Singapore, there car road tax is Rs. 50 lac here it is Rs. 6000 for 15 years. 2. Road tax on public transport buses should be reduced from Rs. 2500 per seat/year to nil, and allowed without permit allover in India to reduce oil consumption. 3. To reduce transportation all schools be fixed area bound so that no child go to other school than the nearest. 4. Court case no. of dates should be fixed and reduced to save transportation costs. 5. Petrol allowance to employees be changed to cycle allowance. 6. High cost of dollar is an automatic tool; it will reduce imports if not otherwise planed.
7. Why imported items needed be given as subsidy to the public. Any body who need subsidy on fuel, should be offered coal freely, because it is available in India without imports.
8. LPG/gas should be distributed by pipes than transportation.

from:
AK GOEL

Posted on: Sep 9, 2013 at 16:29 IST

Wouldn't be better if only really high value but non-essential items be banned for import so that the purpose of the government to arrest the drain on foreign exchance can be realized?

from:
D. Chandramouli

Posted on: Sep 9, 2013 at 13:04 IST

What were you doing so far, Mr.Chidambaram? Does a patient have to be extremely sick before a doctor decides to treat him?

from:
K.Vijayakumar

Posted on: Sep 8, 2013 at 22:55 IST

Government can bring down ceiling on royalty of Rs 35000 crores goes out of country since 2009.

Non dividend paying companies since 1978 to be surveyed and pull them up and their assets can be ceased if necessary

from:
R.Gopu

Posted on: Sep 8, 2013 at 18:13 IST

India's problems are of manifold ,it can be divided mainly into two categories; external and internal.Eternal problems stems from the global gloom, slow recovery in US and EU and of course the rising prices of crude oil in international market. In the recent past when we were a final destination for the investment, FII poured in good amount of foreign currency which was used to fund the CAD but now its difficult,especially in the wake of US tapering with the QE and investors finding India not attractive any more. On the other hand we have the inflation at all time high and high oil prices are exacerbating it further, our exports have not been able to meet the target either. therefore some austerity measures are inevitable,inverted duty structure in import have allowed the free flow of non essential items, resulting in higher CAD and we are at paucity of option to fund it, credit rating is not helping either. Therefore Gov is correct in banning import to a certain extent to reduce cad

from:
neeraj bhatt

Posted on: Sep 8, 2013 at 16:29 IST

During 70's when USD was around Rs. 21.00, import of X'ray machines was considered a luxury item and attracted 240% import duty. Today, one can find garbage bags in roll form with a Band printed 'Made in China' sold in India. Earlier, home appliances like pressure cookers, frying pans, etc 'Made in China' are now sold in India under Indian Brand names which were earlier manufactured in India. Logic is: iron ore we export to China, comes back in finished goods ? Excellent job and wealth creation in China facilitated by leaders in India !!

from:
kitnasamy

Posted on: Sep 8, 2013 at 16:07 IST

Most of the non essential imports are luxury items which are imported at a very high price. It includes all high end cars both new and used. Please ban them. Some junk electronic products from China are also coming to India in huge quantities much more than what we require. I guess banning these imports would allow the Indian companies to produce instead of going for OEM manufacturing outside the country. When usa is putting more restrictions on IT outsourcing which is our strength, we should also put more restrictions on the oem outsourcing which is someone else's strength.

from:
Raman Thakur

Posted on: Sep 8, 2013 at 15:22 IST

What will be benefits of falling rupee to politicians getting their dollars back from tax havens for the upcoming elections?

from:
Ajay

Posted on: Sep 8, 2013 at 15:07 IST

Please introduce fractions of the rupee. 0.01 paise, 0.05 paise, 0.25 paise. This will result in slowing down rise in price of essential commodities. Make them available in sufficient quantities as a medium of exchange. For the Honourable Finance Minister Re 1.00 rise in the price of the paper he uses to write his speeches maybe tolerable but for the ordinary citizen to tolerate the price rise of such magnitude is very painful. If small denomination coins are made available people will get used to negotiate prices in the fraction of a rupee instead of in whole number.

from:
DVR

Posted on: Sep 8, 2013 at 14:11 IST

Good that he said before hand and why not make everthing minimum Rs 100- In a way he says that the Indian rupee all from 1 to 100 be removed - and start again.